A computer error meant that 420,000 individuals who should be paying the new Scottish rate of income tax were not told of their changed status, the National Audit Office has found.

A report by the NAO reveals the number of potential Scottish taxpayers who were excluded from the initial identification exercise in 2015 because of an IT error and received their new “S” tax code three months after it came into force last April.

The report identifies “significant challenges” for HM Revenue and Customs, which will assess and collect the new tax on behalf of Scotland. HMRC only discovered the initial scan of its database was incomplete after being contacted by members of the Scottish government and the public who had not received, or knew people who had not received, notification letters.

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